You might think that the Federal Reserve has a lot of ways to deal with inflation, but there isn’t a single thing it can do about supply chain costs.
The Fed doesn’t have any control over port congestion, poor schedule reliability because of the congestion, and China’s “zero-COVID” policies, which make it hard for people to move goods. Ocean freight costs have gone up because of all three.
It has long been known that these costs are being passed on to the customer. Freightos put the Consumer Price Index (CPI) on container rates from China to the West Coast and China to the East Coast, so people could see how much things were going up. The trend is already there.
Even though there are other reasons why prices are going up (like a lack of workers), it can’t be said that maritime costs aren’t one of them.
It looks like this sluggishness won’t be going away any time soon, based on the flow of ocean trade.
Vessels are still taking a long time to get from China to the West Coast, and the zero-COVID rules in China are slowing down the process of trade. These delays are a problem all over the world.
There are pipes in trade, so if one of them gets blocked, it will affect the rest.
The word “schedule” in maritime right now is laughable. Again, global reliability went down, by 1.2 percentage points month to month, to 32 percent on the Sea-Intelligence Global Schedule Reliability index. This time, it was down to 32 percent. This is the worst performance that Sea-Intelligence has seen since they started taking the measurements in 2011.
Over a week, the window for a ship to arrive is open.
As it turns out, what the carriers think is a “solution” only causes more problems in the trade.
As a way to make up for lost time, ocean carriers are canceling sailings so they can get back to China. This stops the flow of trade at ports that aren’t being used. It takes longer for products to arrive, which affects inventory. It’s another thing that makes prices go up.
China’s zero-COVID policy is one of the main things that drive up prices.
The land-based restrictions at the country’s main ports are affecting the country’s ability to handle goods. Fewer people at work means less capacity to handle things. Vessels will have to wait longer at their berths because there is less capacity to handle them.
People in China who work in logistics say that zero-COVID is now affecting trucking in other important ports of China. Yantian and Shekou are two of them.
Jan. 22 was a bad day for shipping containers. Shekou and Yantian ports both cut back on how early they could be dropped off. Under the new rules, full containers can only be taken into the terminals three days before the ship’s arrival at Shekou. During the four days before a ship’s arrival at the port of Yantian, containers can be dropped off.
Before this new rule, these containers could be accepted seven days before a ship’s arrival time. In the long run, this will only make the system run more slowly.
For as long as there isn’t enough space at ports to move things and there aren’t zero-COVID policies in place, trade and freight prices are going to be slow.
The maritime superhighway needs to go back to being the Autobahn, not the LA freeway at rush hour when it’s crowded.
